US tariffs: Agoa is dead, now for plan B

On Thursday morning, US President Donald Trump effectively ended Agoa, the Africa Growth and Opportunity Act, after imposing a 30% duty on all goods imported from South Africa.

While new trade tariffs were imposed globally, it marks the latest in a raft of punitive missives against South Africa.

Trump’s tariffs mean end of Agoa

Economist Dawie Roodt said that the tariffs may only make a small dent of between 0.2% and 0.6% in gross domestic product.

“It is not the end of the world,” he said. “But while Trump didn’t say so directly, it marks the end of Agoa. The trade agreement, which zeroed duties on around 1 800 items, was due to expire at the end of September this year.

“If the status quo remains,” said Roodt, “there will be no renegotiation of terms either.”

Trump administration ‘petulant and impulsive’

Dean of Regent Business School Dr Shahiem Patel said that the original spirit of Agoa, which was built on development, mutual benefit, and soft power, no longer aligns with the Trump administration’s approach, which he described as “petulant, impulsive” and driven by dominance and transactionalism.

“That worldview is gone,” he said.

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Ray Langa, chief executive of Leagas Delaney, agreed. But he doesn’t believe Agoa is dead, but that it hangs by a thread. “Policies fuelled by mistrust and quid pro quo politics have put South Africa’s position at risk,” he said.

DA leader John Steenhuisen agreed that Agoa is done for. He said he has already been looking for alternative markets for South African agricultural products.

Roodt added that South Africa has already previously violated some of the terms of Agoa regardless, notably that countries must combat corruption and bribery, avoid activities that undermine US national security or foreign policy interests, or that involve violations of human rights. State capture fraud alone was estimated to have lost South Africa R250 billion. Exports to the US amounted to more than R 270 billion last year.

Thousands of jobs on the line

Steenhuisen said the tariffs imposed are going to be devastating for the automotive sector and will have grave repercussions for its workers and manufacturers.

Beyond cars and components, wine and agricultural products may be impacted severely as Agoa fades. Estimates from various experts peg consequential job losses between 60 and 100 000. This excludes additional value chain opportunities such as parts or equipment manufacturing across several other sectors and, in some cases SADC countries.

Marc Lubner, chief executive of Afrika Tikkun, said the new tariffs are a move away from the America who were custodians of the free world.

“The moves are dramatic, and I feel that insufficient thought went into the impact these tariffs will have immediately and over time,” he said.

Patel added that Washington’s focus on trade deficits undermines Agoa’s intent and warned that while some African nations may still benefit, South Africa won’t.

“We’re heading down the path where Agoa is at risk and South Africa is dead in the water,” he said.

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Roodt expects that the duties imposed on South African exports may signal more action to come. Trump reprised his “bad things are happening in South Africa” mantra and mooted sanctions against individuals deemed undesirable by the United States may only be the beginning.

‘This will stuff up South Africa completely’

Financial sanctions may follow should the former come to pass.

“This will stuff up South Africa completely,” said Roodt.

Governments or global bodies use financial sanctions as tools to block access to money, markets or financial services. They’re meant to hit where it hurts, the wallet, to influence the behaviour of individuals, organisations or countries.

That could mean freezing assets, cutting off loans and insurance, banning investments, or blocking trade finance.

“Should this come to pass we will head for chaos. Roodt said capital markets face severe pressure and our economy faces a big shock,” said Roodt.

South Africa is facing an economic and diplomatic deep freeze.

“The overall message from America is clear,” said Roodt. “If you mess with Trump’s friends you are messing with the wrong guys.” He counted military exercises with Russia, the case against Israel at the ICJ, violation of property rights through the Expropriation Act and cosying up with enemies like Iran and frenemies such as China on the Trump chart.

Lubner added that “one cannot constantly spit in the face of the newly elected US leadership and not anticipate some form of retaliation. It would be naive to presume otherwise”.

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It’s the workers that will be most affected at a time when we simply cannot afford more unemployed people, he said.

“Cuts to aid and tariffs can’t possibly support an economy already desperate for job creation and revenue. We export more to the U.S. than we import, so this means less income at a time when we need growing trade and hard currency receipts.”